CHANCELLOR MERKEL: (As translated.) Ladies and gentlemen, I am
delighted to be able to welcome the President of the United States here
to Stralsund yet again. We had a lengthy conversation right now in the
Office of the Mayor. We felt very much at home here in this beautiful
city. We talked about all of the different issues on the global agenda.

We shall, later on, see a little bit more of the countryside here,
of the city itself. I am really pleased to be able to show to the
President of the United States how matters have developed here, with
some problems still existing, but also with problems we've coped with
quite successfully. And it's such a great thing to have this lovely
weather for our visits.

Just now, in our talks, we talked at great length about
international issues. Unfortunately, there are quite a lot of problems
that we need to deal with and for whose solution we feel responsible.
The first and foremost, on top of the agenda is certainly Iran. The
international community actually submitted a very substantial, very
fundamental offer to Iran, starting from the firm view that Iran should
not be in possession of a nuclear weapon, but that, on the other hand,
Iran should have -- should know good development. So far we have not
received any sort of reaction from the Iranian leadership as to how
their position is on this offer.

And this is why it was only consistent that yesterday the foreign
ministers decided yet again to show clearly, also through a resolution
in the U.N. Security Council, that should Iran not in any way reply to
this offer and accept this offer, we, unfortunately have to embark on a
new course. The door has not been closed, but Iran must know that those
who have submitted this offer are willing -- and this is the success of
yesterday's meeting -- Russia, China, the E3, and the United States of
America -- all of them together are willing to act in concert and to
show this clearly through their action in the Security Council.

We also addressed the very disturbing situation in the Middle East,
and it fills us with concern and we have also stated clearly that
everything needs to be done in order to come back to a peaceful
resolution. We need to remind all of us again how this escalation
started, with the kidnaping of a soldier, through rockets -- for the
firing of missiles against Israeli territory. And we can only urge all
parties, appeal to all parties to stop, to cease violence and to also
release the kidnaped soldier, and to stop this firing of missiles at
Israeli territory.

We would like to appeal to the powers in the region to see to it
that further escalation is warded off, and that, first and foremost, the
root causes of this conflict are removed. And only in this way will a
negotiating process become possible again. We have every interest in
seeing the Lebanese government be strengthened and this government being
able to pursue its policies in a sensible and secure environment.

We also addressed matters of trade, global trade. Here we -- and
I'm saying this from a German perspective -- have a common interest in
seeing this world round be a successful one, this world trade round.
But that means there has to be movement on all sides. And we're
expecting a reasonable, sensible offer by the G20, because this is where
movement is necessary. Europe and others have submitted far-reaching
proposals, and we would like to explore every possibility of these
negotiations, but that means, as I said, movement on all sides. And
here I see that the G20 has to deliver.

We also addressed those issues that will be on the agenda at the G8
in St. Petersburg. Here, first and foremost, energy policy, secure
energy supply, was at the top of the agenda. We addressed African
issues, Darfur and the Congo mission. We, as Germans, as you know, have
taken out a commitment as regards Congo. We also, however, see the
situation in Darfur as a threatening one.

We found that there is a lot that we agree on, as regards our
common responsibilities, responsibilities that we see for the two of us
the world over. And I, for one, think that as regards, for example,
Iran, this responsibility ought to be shouldered by more and more
countries -- that goes for Russia, that goes for China. It will only be
if we act in concert that we will be able to vanquish the tyrants,
remove dictatorships and contain those who sponsor terrorism. And
Germany would like to give its contribution to that.

PRESIDENT BUSH: Chancellor, thank you very much. Thanks for the
invitation. This is a beautiful part of the world, and Laura and I are
so honored to come to your constituency and meet some of the friendly
people who live here. I remember you coming to the Oval Office, and you
said, if you are coming to Germany, this is the part of Germany I want
you to see. And now I can see why you suggested it. I'm looking
forward to the feast you're going to have tonight. I understand I may
have the honor of slicing the pig.

We had a good discussion -- it's more than a discussion, it's
really a strategy session, is the way I'd like to describe it. We
talked about a lot of subjects. We talked about the Middle East and
Iran, and I briefed the Chancellor on North Korea. We talked about Iraq
and Afghanistan, as well.

But when we talked about the issues, it's important for you to
understand we're really trying to figure out how to work together to
solve problems. And I appreciate -- appreciate the Chancellor's
judgment a lot. It's an interesting conversation, you know, when you
toss out what may seem to be a problem that's insoluble, and all of a
sudden, two people start thinking about how to solve it, solve the
problem. And that's what we're doing.

You know, on the Iranian issue, for example, the last time that we
were together we talked -- spent a lot of time on Iran, and the
Chancellor was wondering whether or not the United States would ever
come to the table to negotiate with the Iranians. You made that pretty
clear to me that you thought it was something -- an option we ought to
consider, which I did. And I made it clear to the Iranians that if they
were to do what they said they would do, which is to stop enrichment in
a verifiable fashion, we're more than pleased to come back to the table.

There's no question that this issue can be solved diplomatically,
and there's no question that it can be solved diplomatically with
Germany and the United States strategizing as how to solve it. And I
want to thank the Chancellor's leadership on this issue. It's really
important for Europe to speak with one common voice. And it's important
for Angela and myself to work with Vladimir Putin, which we will do at
the G8, to continue to encourage him to join us in saying to the
Iranians loud and clear, we're not kidding, it's a serious issue, the
world is united in insisting that you not have a nuclear weapons
program.

We talked about the Israeli-Palestinian and Israeli issues with
Hezbollah, and our common desire to work together to help bring peace to
that troubled region.

My attitude is this: There are a group of terrorists who want to
stop the advance of peace. And those of -- who are peace-loving must
work together to help the agents of peace -- Israel, President Abbas,
and others -- to achieve their objective. You got to understand when
peace advances, it's in the terrorists' interests in some cases to stop
it. And that's what's happening.

We were headed toward the road map, things looked positive, and
terrorists stepped up and kidnaped a soldier, fired rockets into Israel.
Now we've got two more kidnapings up north. Hezbollah doesn't want
there to be peace. The militant arm of Hamas doesn't want there to be
peace. And those of us who do want peace will continue to work together
to encourage peace.

We talked about North Korea. I assured the Chancellor that I'm
committed to the six-party talks and that the five of us in the
six-party talks will work to convince North Korea to come back to the
table. I'm hopeful that we can get some U.N. action on North Korea.

We did talk about Doha, the trade round, and it's -- look, these
trade rounds are difficult to negotiate with; we've all got our own
interests. But the good news is we do share a common desire to open up
markets. Germany is a great exporter. It's in Germany's interest that
tariffs be reduced around the world. It's in our interests that tariffs
be reduced around the world. And I committed to what I told the world
back last September, we will reduce agricultural subsidies. But all we
want is fair treatment when it comes to market access.

I'm optimistic we can still get something done on the Doha Round.
It's going to take work, but G8 is a good place for us to continue the
dialogue, and we will.

And I guess that's about all -- we discussed a lot of things, in
other words. And thank you for having me. I'm looking forward to that
pig tonight. (Laughter.)

I'll be glad to answer a couple of questions. Do you want to start
her off?

Q Chancellor, you spoke about charting a new course as regards a
response to the Iranian conflict. What new course will that be? You
talked about the results of the foreign ministers' meeting where they
will appeal to the Security Council. What sort of action will there be?
Again, just a resolution that only demands certain things, or is the
objective a resolution that will then actually threaten sanctions of a
specific nature? This question is also addressed to the President.

CHANCELLOR MERKEL: Well, essentially what we're talking about here
is not a totally new process, it's just another phase. We have waited
patiently whether Iran will examine this offer and in which way it will
react. So far we have not had any sort of reliable reaction. And for
us, the precondition for talks has always been suspension of the
enrichment activities, and a precondition for talks has always been,
well, we will then, under the circumstances, not react with sanctions.
But through this common action, we are now making clear, because we are
not receiving a reply, that there will be a concerted action and that
there will be specific steps. And we're defining what steps these will
be if Iran continues to let us wait with its response.

So we wanted to demonstrate yet again that the international
community is willing to show resolve to pursue this strategy further in
every direction. Iran has received a proposal that I think is a very
substantive one, a very good one, one that is good for the development
of its own country, of its own interests -- is in its own interests.
But if Iran should not reply, if they think they can prevaricate in the
hope of the international community being split, then this proves them
wrong. And this is why I am so happy about the conclusion of that
meeting of the foreign ministers.

PRESIDENT BUSH: This notion that the Iranians must understand that
they can't wait us out and can't hope to split a coalition -- and so the
first step is to go to the United Nations and speak with as common a
voice as possible.

Your question really is, how fast should the process move along?
And my attitude is, the answer to that is, it should move as fast as
necessary to make it effective, which is a non-answer, admittedly. But
the truth of the matter is, diplomacy takes a lot of work, and there are
different interests involved here. We do share a common goal of no
nuclear weapon and no program. And, by the way, we've already
sanctioned Iran, so we've got a different position than others. It's
easy for me to espouse sanctions, since it's already a fait accompli.
But we understand other nations have got -- there's a pace to this
diplomacy. And I assured the Chancellor that the United States will
continue to work to make sure the process is steady as it moves forward.

The key first step is, common goal, which is no nuclear weapon or
program, and united message to the Iranians. I truly think they're
trying to wait us out. They think it's a matter of time before people
lose their nerve, or a matter of time before different interests are
able to influence the process. And I think they're going to be sorely
mistaken. I think they're going to be disappointed that this coalition
is a lot firmer than they think.

It is in our interests to make sure they don't have a weapon. It
would be dangerous if the Iranians had a nuclear weapon. And that's a
recognizable fact now. So I appreciate the Chancellor's position on
this.

Yes, Terry.

Q Madam Chancellor, Mr. President. Terry Hunt with the AP.
Looking ahead to St. Petersburg, I'd like to ask you, do you think that
Russia is honoring human rights and democratic freedoms and has a
responsible approach to energy security?

And, Mr. President, were you surprised by President Putin replying
to Vice President Cheney's criticism, saying that it was an
"unsuccessful hunting shot?"

PRESIDENT BUSH: Did I think it was a clever response? It was
pretty clever. Actually, quite humorous -- not to dis my friend, the
Vice President. I don't know, do you want to start with this? I'd be
glad to -- (laughter.) No, I think our job is to continually remind
Russia that if he wants to do -- have good relations, that she ought to
share common values with us. We share common values -- free press is a
common value we share. And I've expressed my opinion to President
Putin. You might remember my visit with him in Slovakia where I was
quite pointed in my concerns about whether or not there is a free and
vibrant press in Russia. We share concerns about the ability for people
to go to the town square and express their opinions, and whether or not
dissent is tolerated, whether or not there's active political
opposition.

And so I will continue to carry that message. My own view of
dealing with President Putin, though, is that nobody really likes to be
lectured a lot, and if you want to be an effective person, what you
don't go is scold the person publicly all the time; that you remind him
where we may have a difference of opinion, but you do so in a respectful
way, so you can then sit down and have a constructive dialogue.

And that's exactly how I'm going to continue my relations with
President Putin. I'll be firm about my belief in certain democratic
institutions; I'll be firm in my belief about the need for there to be
an active civil society and NGOs should be allowed to function in Russia
without intimidation. But I'm also going to be respectful of the leader
of an important country. And I may not tell you exactly what I talked
to him about in private. And I would hope that he wouldn't tell you
what he talks to me about in private.

But, yes, we've got issues. Listen, we've got common problems that
we need to work together to solve -- North Korea and Iran are two. And
we've also got -- I hope he continues to understand that it's in his
country's interest to implement the values that Germany and Russia --
Germany and the United States share.

CHANCELLOR MERKEL: Well, first as to the issue of energy security,
I can safely say that, looking at Germany over the past few decades,
Russia has always proved to be a reliable supplier of energy. They have
always abided by the treaties that we signed. But we would wish -- and
I've addressed this with the Russian President -- that they actually
bring the energy charter to its completion, that is to say, commit
themselves to it, because then we would have a greater degree of
certainty and security that we understand our common commitments on
this.

As regards -- a strategic link between Russia and Europe,
obviously, is of tremendous importance. It's important because we need
energy supplies from Russia. And this is why we shall work towards
Russia accepting that charter, that energy charter, so that we get a
legitimate charter that is also based on contracts. But again, it has
to be said that Russia has always been a reliable supplier.

As to democracy and human rights, during my visit to Russia I met
with a number of representatives of non-governmental organizations. We
discussed what is desirable, what ought to be there as regards Russia's
further development, and what needs to be addressed, time and again, and
let me tell you that I talked to the President about these issues.

I think also we ought to have an open, confidential dialogue. We
should not sort of speak loudly and in public about certain issues; that
we have different ideas about how a pluralist society, a democratic
society ought to work; that there ought to be a strong opposition is
certainly one of the realities of life. There are differences of
opinion between Russia and the European Union. We would wish for Russia
to embark on a path that leads to a lively and very pluralistic
political landscape, that they enter into a dialogue with their civil
society, which is at yet not there, for many reasons.

But we would like to share with them also the experience that we've
made with democracy, that pluralism in a democracy, last but not least,
actually enhances stability in a country. And that is an experience
that we have made, and that is a very strong force which drives reform
processes forward. For example, we've seen that in German unity. It's
sometimes complicated to bring those decision-making processes forward
in a democracy, but then you receive the necessary legitimacy. And that
is the experience that informs us in our talks.

Q A question addressed to you both. You talked about the Middle
East, and what is your assessment of the military action of Israel in
Lebanon? The French Foreign Minister already said it is
disproportionate. Does that give you cause for Europe or the United
States to intervene?

And apart from the pig, Mr. President, what sort of insights have
you been able to gain as regards East Germany? -- (inaudible) --

CHANCELLOR MERKEL: Neither have I, but apparently a camera team
was there when it was shot. So apparently it is already there,
physically. (Laughter.) I hope it's actually roasting; otherwise we
won't be able to eat it tonight.

Well, as to the violence in the Middle East, particularly as
regards Lebanon, I think that one needs to be very careful to make a
clear distinction between the root causes and the consequences of
something. So we started here from a case of kidnaping of a soldier,
and one of the other root causes also is the activity of Hezbollah. And
it's most important for the Israeli government to be strengthened, but
it is also clearly shown that these incursions, such as the kidnaping of
soldiers, is not acceptable.

And the parties to that conflict obviously have to use
proportionate means, but I am not at all for sort of blurring the lines
between the root causes and the consequences of an action. There has to
be a good reaction now, not from the Israeli government, but from those
who started these attacks in the first place.

PRESIDENT BUSH: -- to help calm the situation, we've got diplomats
in the region. Secretary of State Rice, who is here, is on the phone
talking to herf counterparts. I'll be making calls.

I gave you my initial impression earlier, and that is that it's a
sad situation where -- when there is a very good chance for there to be
a two-state solution enacted -- that is two states living side-by-side
in peace -- it's really sad where people are willing to take innocent
life in order to stop that progress. As a matter of fact, it's
pathetic.

And having said that, Israel has a right to defend herself. Every
nation must defend herself against terrorist attacks and the killing of
innocent life. It's a necessary part of the 21st century.

Secondly, we -- whatever Israel does, though, should not weaken the
Siniora government in Lebanon. We're concerned about the fragile
democracy in Lebanon. We've been working very hard through the United
Nations and with partners to strengthen the democracy in Lebanon. The
Lebanese people have democratic aspirations, which is being undermined
by the actions and activities of Hezbollah.

Thirdly, Syria needs to be held to account. Syria is housing the
militant wing of Hamas. Hezbollah has got an active presence in Syria.
The truth of the matter is, if we really want there to be -- the
situation to settle down, the soldiers need to be returned, and
President Assad needs to show some leadership toward peace.

To answer your question about the involvement, we will be involved
diplomatically, and are involved diplomatically.

Steve.

Q Thank you, sir. Just to follow up --

PRESIDENT BUSH: Follow up on?

Q On both of these. Does it concern you that the Beirut airport
has been bombed? And do you see a risk of triggering a wider war?

And on Iran, they've, so far, refused to respond. Is it now past
the deadline, or do they still have more time to respond?

PRESIDENT BUSH: I thought you were going to ask me about the pig.

Q I'm curious about that, too. (Laughter.)

PRESIDENT BUSH: The pig? I'll tell you tomorrow after I eat it.

The Iranian issue is -- will be taken to the U.N. Security Council.
We said that we have -- to the Iranians, we said, here's your chance to
move forward, and we'd like a response in a reasonable period of time.
And we meant what we said. One of the important things about moving
toward the Security Council, it shows that when we say something, we
mean it. In order for -- to help solve these problems, you just can't
say things and not mean it. And so when we spoke, we said, reasonable
period of time; weeks not months -- that's what we explained to the
Iranians. They evidently didn't believe us. And so now we're going to
go to the Security Council, and we're united in doing that.

PRESIDENT BUSH: Oh, they've got plenty of time. I mean, the U.N.
Security Council, they've got time to react. They've got time to make a
decision. By the way, it's their choice. We've made our choice. It's
the Iranian choice. And as Angela mentioned, there was an offer put on
the table, a reasonable offer for them to make the choice as to the way
forward.

And our choice is, look, we want to have relations with you, but
you're not going to have a weapon or the capacity to make a weapon. It
would be incredibly dangerous if we -- five years from now, Iran shows
up with a nuclear weapon and threatens people in the neighborhood, and
they're going to say, where were you? What were you doing during that
period of time? And that's what we're working on.

And so time -- that's -- when we said, weeks not months, we meant
it. And now we're heading to the U.N. Security Council. They can show
up any time and say, wait a minute, now we'd like to go back and
negotiate, now -- take a look at the interests. We're not precluding
any further negotiations with the Iranians.

In order for us to come to the table, however, what they must do is
verifiably show that they're not enriching, like they said they would do
earlier. This is not a -- this is not a new statement by them. They
agreed to this in Paris. All we're asking them to do is to honor what
they said they would do in the past in a verifiable fashion.

The rest of your four-part question?

Q Sorry about that, sir.

PRESIDENT BUSH: That's okay, it just -- it's a bad habit.

Q Does the Beirut -- the attack on the Beirut airport, does that
concern you, and are you concerned about triggering a wider Middle East
war?

PRESIDENT BUSH: As I mentioned, my biggest concern is whether or
not actions taken will weaken the Siniora government. Democracy in
Lebanon is an important part of laying a foundation for peace in that
region. We have worked really hard to get Syria out of Lebanon -- U.N.
Resolution 1559, and it's follow-up Resolution 1680 were manifestations
of the work of the international community to get Syria out of Lebanon.
We've always felt that a democracy in Lebanon is important for the
Lebanese people, and it's important for the region.

So the concern is that any activities by Israel to protect herself
will weaken that government. And we have made that -- or topple that
government -- and we've made it clear in our discussions.

Having said all that, people need to protect themselves. There are
terrorists who will blow up innocent people in order to achieve tactical
objectives. In this case, the objective is to stop the advance of peace
-- which is a remarkable statement, isn't it? Willing to kill to stop
peace.

We have a good chance to get a two-state solution, two democracies
living side-by-side in peace. It is a clear and achievable vision.
There is a way forward called the road map to achieve that vision. What
will prevent that vision from being achieved is -- are terrorist
activities, and that's what you're seeing taking place.